Taxing a Platform: Transaction vs. Access Taxes
21 Pages Posted: 11 Aug 2015 Last revised: 21 Sep 2018
Date Written: September 4, 2018
Abstract
This paper studies the impact of taxes on a two-sided platform’s pricing, participation, and welfare. Two types of taxes are examined: a tax on access to the platform and a tax on transactions between the platform’s buyers and sellers. Access taxes have clear implications while transaction taxes are less straightforward. One result is that welfare increases with a transaction tax if the side of the market with the larger network effect has the smaller transaction tax burden. To highlight the main results, I determine the implications of potential tax policies on Airbnb, Amazon, and the video game market.
Keywords: Two-sided markets, Sales tax, Pass-through, Video games, Airbnb, Amazon
JEL Classification: D4, H22, H23, L5
Suggested Citation: Suggested Citation